Industry Speak

By Abigail A. Lorden, Editor-in-Chief
| March 03, 2011

Hospitality Technology has tapped the collective wisdom of its Editorial Advisory Board to get answers to many of your, and our, burning questions. How healthy do the hotel and restaurant industries appear through the eyes of an IT exec? What areas of technology are the most under-innovated? Where are there opportunities to maximize positive change with minimum investment (what we like to call “low-hanging fruit”)? We’ve got the answers to these questions, and more, that we hope will provide inspiration, moral support and get your creative bytes flowing. At the least, we encourage you to share the input of your peers with the finance, marketing and operations executives at your own companies. Hearing it from someone else may help bolster support for your ideas. Or as Joe Tenczar, CIO from Hard Rock Intl reminds us, “You may get a raise, or at least more things to do with the same amount of people.” On behalf of Hospitality Technology, we offer our sincere thanks to the entire editorial advisory board for having great insight and for your willingness to share it. ­— AL

Q. On a scale of 1 (lowest) to 10 rate the health of your industry.

Steve Barrow, VP of IS, Luby’s, Inc.: (5) I think the industry weathered the storm from the economic downturn but we still have a long way to go. The real estate market remains soft, which makes expansion difficult. Operators are trying to squeeze more out of existing investments, which places a premium on efficiency and cost control.

Steve Brooks, Dir., IS, Tumbleweed Southwest Grill: (7) I believe hospitality will have 1% to 3% growth in 2011 and 3% to 5% growth in 2012. Over half of this will be from pricing, and half from guest counts. Guest-oriented chains will grow more, and those who focus less [on guests] will decline.

Mike Dickersbach, VP, IT, Thayer Lodging Group: (4.5) RevPar is still down and occupancy in many cities still isn’t what it was, but we are seeing some positive trends that I hope play through Q4.

Brian Garavuso, Executive VP & CIO, Diamond Resorts Int’l: (4.5) City centers seem to be recovering faster than leisure destinations. Occupancies and room rates are improving, but length-of-stay and out-of-room spend is still significantly less than historical trends. Until the high unemployment rate improves and consumer confidence is restored, travel and leisure spend will continue to lag.

Michael Hassell, Dir., IT, China Grill Mgmt.: (4.5) My personal opinion is that we, as consumers, have not seen the indicators that make us feel that the economy has rebounded as strongly as we would like. Being in the high-end of the market, we will be last to see our guests come back.

David Lehn, VP, IT, Noodles & Company: (7) We continue to see restaurant brands, both large and small, opening new locations and new markets. International markets in particular appear to be an area experiencing very nice growth from most of the large QSRs. And I think we’ll be seeing more brands venture into previously untapped day-parts, notably breakfast.

Rocky Lucia, Dir., IT, B.R. Guest Hospitality: (7) As the global economy starts to slowly recover, the hospitality industry seems to be back in demand and many operators are cautiously optimistic about sales growth. The industry’s biggest challenges in 2011, I think, will be higher commodity costs and high unemployment rates that could stall consumer spending.

Mark McBeth, VP of IT, North America, Starwood Hotels & Resorts: (6.5) Demand is increasing, while supply is limited due to the credit issues of the last two years. Business travel is back strong, we are seeing improved group pace, and RevPar growth is back in the double digit range. Three keys to the recovery and the industry’s ongoing health outlook are the imminent arrival of Chinese tourism, technology and GenY. This new business will drive our technology strategies for the future, focusing on connectivity, mobility, functionality and innovation.

James Pa, VP, Brand Management, Charley’s Grilled Subs: (5) The volatile economy forced us to deal with previously masked flaws and…either fix them (for the better) or simply cave. Instead of opening more restaurant concepts, and diluting the share-of-stomach, the weaker players should be acquired and improved or I’m afraid they’ll simply dissolve naturally.

Brian Pearson, CIO, Stacked Restaurants, LLC: (6) I believe our industry is going through a Darwinian phase. Companies that were just hanging on prior to 2008 are progressing from a slow steady decline, to an all out free-fall. In an environment where the consumer can point their smartphone camera down a street, and see Yelp! ratings for each choice laid out like guiding beacons, there is no doubt that the pressure is on.

Darrin Pinkham, VP, IT, Benchmark Hospitality Int’l: (5.5) Booking pace continues to improve and shows encouraging signs of real growth. In some markets, the rate is beginning to move in a very positive direction and transactions seem less commoditized than earlier in the down cycle. While revenues will certainly grow in 2011, these are tempered by the need to increase operating expenses for labor, benefits and operating supplies, which has been deferred over the past couple of years.

Daniel Sheehan, Senior VP & CIO, Dunkin’ Brands, Inc.: (7) I believe the economy is turning for the positive and comp sales, average ticket, and guest traffic are all up and continue to increase year-over-year.

Q. Where is the low-hanging fruit in your industry (maximum change with minimal investment)?Barrow: Software as a Service is changing the role of traditional IT. Systems can be acquired and implemented quickly and more cost effectively without requiring major expenditures in IT infrastructure. SaaS can be extremely effective in areas that do not require large amounts of integration support such as recruiting, guest relations, field service and customer relationship management.

Brooks: Business intelligence is the best low-hanging fruit for making a good decision with a location, a menu or just about any financial decision. We will use it for guest and menu analysis, as well as loss prevention.

Dickersbach: In every hotel, it’s telecom. It doesn’t matter what hotel I look at, telecom in 95% of hotels is being mis-billed, overcharged, or they are paying for things they don’t need.

Garavuso: In the timeshare industry, it’s consolidation. Due to the banking crisis and therefore a complete evaporation of financing, coupled with high operating cost structures, many smaller timeshare companies are filing bankruptcy or are being forced into some type of restructuring. For the larger and therefore stronger companies, who have been able to find alternative financing and improved capital resources, there are great opportunities for acquisition.

Pinkham: From a guest services perspective, it has to be high-speed Internet access. This solution must be wireless, fast and always available. You still need to offer a free model, but you should charge for additional bandwidth a nominal amount, and make sure you have the proper circuits and redundant bandwidth to support this number-one requested amenity in all your properties.

Trip Sessions, VP, IT, Wendy’s/Arby’s Group, Inc.: Biometric readers at the unit level. These devices are inexpensive, highly reliable, and easy to implement with many POS software applications today. They provide numerous benefits from cash control to labor control. In the Arby’s brand, we have implemented this technology in more than 700 of our company restaurants with solid results from both a technical and business perspective.

Joe Tenczar, CIO, Hard Rock International: There is no doubt that the synergy between IT and marketing is essential and trending upward. It is crazy to think that inexpensive tools like social media are not being used to their potential in some brands. If your company does not have a social media program, then take the initiative as an IT professional. Make friends with your CMO and prove to them how valuable and reasonably inexpensive Facebook, Twitter, Youtube, and Flickr are as marketing tools. You may get a raise, or at least more things to do with the same amount of people.

Q. What IT project(s) are on your company’s priority list in 2011?Barrow: A back-office implementation in our Fuddruckers brand; we believe the software will give our store managers better tools for purchasing, production scheduling and managing inventory.

Brooks: Software upgrades for accounting and our stores. We are updating Great Plains, POSi and Office to the latest versions and also plan on upgrading hardware that has reached its limit. On hardware we no longer replace it all at the same time, but if we can get maintenance and warranties to extend life, we do. Some of our handhelds and printers are in year five now and still performing well.

Hassell: We’re scrambling to find ways to manage the new rules and regulations associated with the New York State Hospitality Wage Order. I think it is only a matter of time before more states begin introducing additional legislation around work rules and benefits.

Lehn: We want to design and rollout a loyalty program that encourages increased trial across our diverse menu and yields more frequent visits by rewarding our guests in ways that are meaningful to them. We hope to do this, in part, by seamlessly integrating our flourishing e-mail program...with Facebook and Twitter.

Chuck Marratt, VP, IT, MTM Luxury Lodging: AT MTM a continuing priority is the never ending task of being PCI compliant. In 2011 we plan on moving to tokenization with both our food and beverage POS, and with our PMS; we’ll also utilize other technologies to eliminate paper-based credit card authorization forms which have been used by hotels for years. We are also adding considerable bandwidth to each of the MTM properties along with load balancing capabilities and redundant bandwidth connections.

Pa: With over 400 units (in multiple countries and continents) we are faced with the challenges of a standard BOH OS; mainly to benchmark efficiencies between country performances. Our goal is to aggregate the data from these various platforms and use the data to generate meaningful and actionable information.

Pinkham: For 2011, PCI compliance and certification everywhere is number one. Installing a global tokenized credit card hub solution for all our properties for all their transactions is number two. Completing the virtualization project for all of our property Maestro PMS and MICROS 9700 POS solutions, and eliminating these individual property servers, is number three.

Tenzcar: We are putting a lot of muscle behind a more global rollout of our guest-facing, interactive technologies. Our metrics have proven an increase in guest satisfaction and likelihood to return in those units where we showcase Hard Rock content via technology.

Lucia: One of our main objectives for this year is to use the various amounts of guest data we have to understand our guest better and drive them to our website where we can convert them to a sale.

Q. What are several challenges facing the hospitality industry?
Hassell: The fine dining segment is always the last area to recover from an economic downturn, which means we have to work a little harder to fill our seats in the restaurants. We are looking for innovative and exciting ways to get our guests to come back, or to visit us for the first time, without diluting the brand.

Marratt: The speed at which technology changes and current technology becomes obsolete. In the past a PBX switch would last 10 or more years and CRT type TVs could last 10-plus years as well. New technology becomes obsolete much sooner, causing the hotel to make huge capital investments every four to five years instead of every eight to ten years.

McBeth: How to address the ever increasing thirst for bandwidth by both guests and property associates. Customers expect that they can connect whatever device they’ve brought with them…; meanwhile, the industry is moving applications to the cloud or centralizing them in corporate data centers, and having property associates access them through the Internet. In the past hotels would buy a single T1 and share it between guest rooms and administrative associates. That doesn’t work anymore because of the increased demand of both user communities. We’re now looking at this issue and trying to determine whether to split the circuits or use sophisticated bandwidth management solutions to shape and control who gets how much connectivity. Now, throw in the fact that HSIA revenue may soon go the way of telephone revenue. Maintaining Internet Services as a revenue producer is becomingly increasing difficult.

Pearson: Take equal parts low profit margin (our industry), a down economy, a rapidly increasing competitive landscape, and mix with that an outdated belief that your IT systems should last five years or longer, and you have a recipe for disaster. With the significant investment so many multi-unit operators have in POS and other IT systems, those very tool-sets can represent a barrier to entry for innovation. If the industry had tighter restrictions on APIs and/or pre-packaged interface middleware, I can all but guarantee that more companies would be implementing more innovation.

R.P. Rama, VP & CTO/CIO, JHM Hotels: The needs of the customer; in particular, the current traveler (Gen X) and future traveler (Gen Y), who are users of mobile technology. They want Internet access wherever they are. They carry their gadgets with them, and they are used to having access to their work or entertainment in audio or video on an instant impulse. They will stay at hotels that provide them these services.

Tenczar: One of the more significant challenges remains PCI Compliance in the hospitality industry. In 2010 we implemented the remaining systems and safeguards that all but eliminated “compensating controls.” With PCI-DSS 2.0, the regulation scope increases again. We have the process for compliance down to a science, but it certainly is not trivial. Getting to this point was challenging. The rules can be ambiguous, depending on the QSA that you hire. Based on conversations with my peers at 2010 meetings, there is a huge variance in the magnitude of compliance. I gathered the biggest challenge for most is how to enforce PCI compliance on franchisees.

Q. Where, in your opinion, is technology innovation lacking?Barrow: Integration tools. Consider all of the places that menu items and prices might be stored: traditional POS, handheld POS, kitchen display systems, online ordering, kiosk, and digital menu boards, to name a few. One could easily have several different technology vendors in each area with no clear integration capabilities among them. These technologies are often easy to implement as point solutions but difficult to scale and manage. The task becomes more daunting when these solutions are implemented in multiple brands.

Brooks: I believe that wireless technology is behind the curve in hospitality, specifically in restaurants. For all the innovation in our home and office, very few businesses utilize wireless devices like handhelds, tablets and touch screens for the guest and pay-at-table devices.

Marratt: Although tremendous progress has been made in the ability to integrate different technology platforms within a hotel to provide better and more efficient service to the guest and enhance the management of the hotel by the staff, there is still much work to be done. Standards need to be set for hospitality technology platforms, especially in regard to guestroom technology, to insure the ease of integration and interoperability of systems.

Sessions: One area lacking in innovation is the area of payment technologies. I think this is negatively impacting guests’ experiences in multiple ways. The practical constrains of PCI stifle companies’ abilities to offer innovative payment solutions to consumers. These same constraints create a competitive imbalance, by allowing the largest companies with the most resources to offer unique, compelling payment offerings while the smaller companies are relegated to focus their resources to “keep the lights on” in order to process credit cards. To their credit, Starbucks recognized this dynamic, executed against it, and due to high barriers to entry, has a nice lead on the industry.

Pearson: One of my greatest frustrations with the industry in general is the lack of highly available guest experience management systems (GEMS). If you want to order something for take-out, the solutions will vary from phoning it in, faxing it in, using online ordering, and a very few have mobile ordering on either the iOS or Android platforms. Additionally, the loyalty and reservations systems require the guest to have prior knowledge of the particular organization to effectively leverage them. It may sound utopian, but as a guest, I should be able to make a reservation or put my name on any wait list using familiar tools. I should be able to engage with concepts in a way that doesn’t take training with each iteration. I really believe our industry needs to take a lesson from Facebook. If you make a game for FB, you have to follow certain rules. Those rules ultimately end up protecting a guest experience. We need a few more GEMS in the industry.

Rama: Infrastructure challenges abound. In cases where buildings are old, and old infrastructure exists, new infrastructure cannot be implemented due to structural challenges. If it can be implemented it is cost prohibitive and in some cases unstable. I’d also like to see more innovation for tracking service trays in hotel corridors after guests have left their trays outside their rooms to be picked up by the room service department.

Sheehan: Video surveillance software that is integrated with POS sales transactions. Employee theft is 3% to 7% of sales; that’s huge! We created integration, but need to move faster!

Tenczar: I think the industry needs to take a more serious/focused approach to payment at the table. It is ridiculous to me that so few POS vendors offer a feasible, integrated wireless option. Many have tried with limited success for one technology reason or another. Consumer awareness of identity theft and pure convenience are going to mandate this in the next 18 months…if the PCI council doesn’t beat them to it.

Q. What emerging technology do you consider particularly useful to your company?Dickersbach: I’m tired, as is most everyone I’m sure, of hearing about cloud computing, the fancy, consumer-friendly term that replaced SaaS (Software as a Service), which was around well before it was coined “The Cloud.” It is definitely a means that should be utilized in our industry for guest-facing technologies and back-of-house. Let’s reduce the machine hardware footprint to better manage everything.

Hassell: We are very interested in mobile device applications; this fits in well with our initiatives to better utilize social media, along with some of the self-service applications that are out there on the horizon. Giving our guest the opportunity [to interact with us] from anywhere in the world to anywhere we may be, be it the sommelier in the dining room in Las Vegas, the catering manager in South Beach, or the marketing team in New York, is something that we are really excited about.

Lehn: 2D codes, such as QR codes and Microsoft tags. The amount and type of information that one can store and share via this technology is very exciting for us. No longer are you limited to a small amount of space in which to tell a story or create certain behaviors. By displaying a code our guests can be instantly transported to an entire website full of valuable information. We might redirect them to a brief video that describes how we produce our famous sauces; or to a nutritional calculator so they can see how few calories a particular dish has; or even to a survey or sign-up page to be included in our more traditional e-mail campaigns.

Lucia: Social networking and mobilization have been very useful to us. It seems like everyone today is on Facebook, Tweeting, using Foursquare, etc. Today’s guest is all about this technology. There are so many ways to create a following, which ultimately will drive guests to visit your website, make a reservation, purchase a gift card and become a loyal member of your hospitality group.

Rama: The use of electric buses for guest transportation, which is a less expensive alternative than gas. There are companies in the U.S. that are working on this technology, but the investment remains in question. I am hearing that…hotels could install charging stations for electric cars and buses, opening up a pay-for-charge revenue model for the hotel.

Sheehan: Back office scanners. This may be old news; however, we are looking for the “Swiss Army Knife” of back office scanners, with the ability to scan inventory; record operational metrics such temperature, time and sales; process checks; and be an input device for manager walk-arounds.

Tenczar: The ubiquity of consumer-grade, handheld computing devices has set the bar very high. Things like a ten-hour battery life on an iPad will hopefully spawn commercial-grade devices in the next 12 to 18 months. We have many uses for these types of devices, but the consumer units can’t take my “rib sauce test.” We use this type of technology for seating system scouts, roaming music video control, and table-top guest interaction. To this point we have had to choose between lower battery life, large external battery packs, or rib sauce in the bezels. I am looking forward to seeing manufacturers catching up with Apple in this area.